Feds’ unheralded $102B rainy day fund kept for the improbable, like cyberattacks

OTTAWA — The federal government committed hundreds of millions of dollars in its recent budget to help reinforce Canada’s cyber defences — but if the effort fails to prevent a major attack, Ottawa can always turn to its little-known $102-billion emergency stash.

The rainy day fund of highly liquid assets is available to keep the government running for at least a month should the country ever find itself confronted by a severe crisis, such as a cyberattack that impairs access to financial markets.

The assets are held in what the government calls its “prudential liquidity plan,” part of which can be compared to a chequing account that offers Ottawa quick access to the funds, if necessary.

A recently released briefing note for Finance Minister Bill Morneau explained details about the unheralded plan.

“Canada holds liquidity reserves as a hedge against highly unlikely but potentially disruptive stress events,” said the August 2017 memo, obtained by The Canadian Press via the Access to Information Act.

“The (prudential liquidity plan) framework ensures that the government holds sufficient high quality liquid assets to cover a ‘survival horizon’ of at least one month.”

The nest egg’s contents are made up of about $2 billion worth of cash balances at the Bank of Canada; $10 billion in cash balances that are auctioned off to financial institutions for durations of typically less than one week so they generate returns; a callable demand deposit of $20 billion at the Bank of Canada; and about $70 billion of foreign reserve assets from Ottawa’s exchange fund account.

In last month’s budget, the government earmarked $507.7 million over five years to strengthen the country’s protections and response capabilities in the event of an cyberattack. The investments will support a new national cybersecurity strategy, a new Canadian Centre for Cyber Security and the creation of a national cybercrime co-ordination unit by the RCMP.

Morneau’s plan also dedicated $2.2 billion over six years to improve the government’s IT services and infrastructure, an investment that includes support for efforts to proactively address cybersecurity threats.

“Successful cyberattacks have the potential to expose the private information of Canadians, cost Canadian businesses millions of dollars, and potentially put Canada’s critical infrastructure networks at risk.”

The Bank of Canada has also issued warnings about cyber threats. It has said the country’s interconnected banks are vulnerable to a cascading series of attacks, something that could undermine broad confidence in the financial system.

The central bank’s governor, Stephen Poloz, has described a severe cyberattack as his worst nightmare. Poloz has said he struggles to even imagine what such an event — and the extent of the resulting damage — might look like.

Canada has long maintained a liquidity management framework but, after the events surrounding the financial crisis of 2008, prudential liquidity was highlighted as a key issue, especially for financial institutions.

Ottawa decided it was important for the government too and introduced the current framework in its 2011 budget. The government calibrated its one-month target to be similar to international guidelines for large banks that followed the financial crisis.

The briefing note to Morneau outlined two objectives of the prudential liquidity plan.

The first is to ensure the government can continue operations and meet its payment obligations, even during stress events. The second objective for the plan is that its existence is intended to support market confidence in the government’s debt program.

The Finance Department recently completed a comprehensive review of the prudential liquidity plan to ensure it held enough liquidity to cover appropriate government liabilities for at least a month, the briefing note said.

Since the federal plan was implemented, the document said provinces, including Ontario and Quebec, have formalized their own liquidity reserves. Other countries, including the United States, maintain similar prudential liquidity reserves, it said.

J.P. Koning, a financial writer and monetary policy watcher, has written about Ottawa’s prudential liquidity plan. He says having the plan isn’t harmful for the government but he questions whether it’s needed since Ottawa could always seek extra funds once a crisis occurs.

“It seems like perhaps it might be a bit of a waste of time and resources,” said the former banker, who offered one possible explanation.

EDMONTON — Alberta is suspending portions of its draft plan to protect threatened woodland caribou, saying more research needs to be done and that Ottawa needs to help out.

Environment Minister Shannon Phillips told the house Monday that the province is acting on concerns about the economic impacts of the protection plan.

“The federal Species at Risk Act is an extremely inflexible instrument that has already had negative economic consequences (in Alberta),” said Phillips.

“We are going to do our best to make sure that we protect jobs on this.”

She said she has sent that message in a letter to her federal counterpart, Catherine McKenna.

Phillips is urging the federal government to help Alberta come up with a workable solution rather than have Ottawa impose an environmental protection order.

Alberta’s draft plan is in response to a federal deadline under the Species at Risk Act passed last October and is designed to help threatened woodland caribou recover in 15 different ranges.

The province released its draft plan on Dec. 19 and then held a series of town hall meetings.

“The public meetings were attended by thousands of Albertans who are concerned about the impact caribou range plans will have on their communities and on the industries that support those communities,” stated Phillips’ letter, which was co-signed by Energy Minister Marg McCuaig-Boyd.

The province plans to spend more than $85 million in the next five years to restore caribou habitat by eliminating seismic lines, building birthing pens and bringing in other measures.

It has already invested $9.2 million and the estimated cost over the next 40 years is $1 billion.

Phillips said the feds need to step up on planning and consultation, and on the money side as well.

“Caribou recovery cannot occur without an infusion of federal funds to restore habitat necessary to ensure population growth,” she wrote.

“While we need more time and partnership from the federal government on this matter, we also need your support in not prematurely implementing federal protection orders that will not have effective outcomes for Canadians and Albertans.”

The federal government has the option of imposing an environmental protection order if a province doesn’t come up with a plan to protect the caribou. The order would halt any development, such as oil drilling, that could harm the animals.

Five Things to know about Canada’s forthcoming peacekeeping mission in Mali

OTTAWA — The Liberal government has unveiled Canada’s 12-month UN peacekeeping commitment to the west African country of Mali. It includes two Chinook helicopters to provide medical evacuations and logistical support, along with four smaller, armed Griffons to act as escorts for the larger transports. Here are five things to know about Mali and the mission.

1. Lots of Canadian aid dollars. Mali has relied heavily on Canadian foreign aid, with only the United States and France contributing more. In 2014-15, Canadian development spending reached $152 million. Since 2012, Canada has also contributed $44 million in humanitarian aid following the country’s 2012 crisis (more on that below) and about $10 million to support the UN peacekeeping mission, making Canada its ninth-largest supporter.

2. The 2012 crisis. It started when soldiers overthrew the country’s president, creating a power vacuum that was filled by an Islamic insurgency. The fall of Libya in 2011 busted the locks off Moammar Gadhafi’s arsenal, spreading weapons across north Africa, which armed various militia groups, including al-Qaida linked organizations. France led a war in 2013 that succeeded in driving the jihadists out of the stronghold they established in northern Mali. A UN peacekeeping force was established that year, and it has become its most dangerous mission with more than 160 fatalities.

3. Canada’s drop in the peacekeeping bucket. Canada’s contribution of 250 personnel is far less than many of its allies. The UN mission comprises more than 13,000 troops. Germany, the country whose air support operations Canada will be replacing, has authorized the deployment of more than 1,000 troops. In addition to the UN mission, Germany has contributed 350 troops to a training mission for Mali’s military. France has 4,000 troops deployed to a counter-terrorism mission in northern Mali separate from the UN’s peacekeeping efforts. “This announcement is a small but important step towards Canada’s re-engagement in peacekeeping,” said peacekeeping expert Walter Dorn of the Canadian Forces College in Toronto, noting that Canada’s contribution to peacekeeping has hit an “all-time low” of a couple of dozen.

4. The political peace process. In June 2015, a peace agreement was signed between the Malian government, Tuareg rebels and other rebel groups. The Tuareg first sparked the 2012 rebellion, but that was soon hijacked by the better-armed jihadists. Those jihadists are outside the peace process. Gen. Jonathan Vance, Canada’s chief of the defence staff, said “there is a prospect of a brighter future for Mali” but that “the basic deconstruction of Libya and the rise of terror groups, terror armies” has to be addressed.

5. The human rights situation. The UN’s latest report on the human rights situation, tabled last month, offers a grim update of the situation in Mali. Between January 2016 and June 2017, it documented 608 cases of human rights violations involving almost 1,500 victims. These occurred across the country, including Gao, where the Canadian air contingent is expected to be based, and further north in Timbuktu. The perpetrators include signatories to the peace process and “non-signatory and splinter armed groups.” The vast majority of the victims are men. The abuse included illegal detention, torture, extrajudicial executions, recruitment of child soldiers and sexual violence.